Your Gender Can No Longer Be Used to Calculate Car Insurance Rates in Some States

Good news for California drivers! Car insurance could be getting less expensive for certain customers. The Golden State has become the seventh U.S. state to ban auto insurers from using gender to calculate customer rates.

California joins Hawaii, Massachusetts, Montana, North Carolina, Pennsylvania and some parts of Michigan in this trend. Currently, the average annual cost of car insurance in the U.S. is $941.65, according to a ValuePenguin study.

Ricardo Lara, California’s insurance commissioner, said in a statement, “Gender, race, ethnicity or sexual orientation are beyond your control, and it is not a fair or even an effective way to predict risk.”

Overall, the move is expected to lower premiums for women drivers, who often pay more on average than men with similar driving records. This is based on discriminatory practices, according to a press release from the Consumer Federation of America (CFA) from earlier this year.

An analysis in the Washington Post says that this move is part of a trend in which state regulators continue to move toward formulas that focus more on how a car is driven than by whom.

“Eliminating gender from auto insurance pricing is consistent with the idea that our premiums should reflect how we drive rather than who we are,” said Douglas Heller, an insurance expert, in the CFA’s press release. Heller provided testimony to the Department of Insurance in support of the rule changes on behalf of CFA and CFC’s Education Foundation.

However, there is at least one female demographic that may not benefit from the changes. Young women, who are statistically less risky than young men, will likely pay more in insurance premiums than young male drivers going forward.

Penny Gusner, a consumer analyst with online marketplace carinsurance.com, told the Post the difference between annual rates for the two demographics could be close to $500 if insurers split the difference between what male teenagers and their female counterparts pay now.

“It’s probably going to meet in the middle, which will probably hurt the female drivers and give the young male drivers a break,” Gusner said.

Typically, auto insurers have used gender as one of many factors to calculate rates. But the California Department of Insurance determined that there was a discrepancy in how companies were setting those rates. Some insurers found that male drivers were riskier. Others said they found the opposite. Also, insurers often combined gender with other, more easily predictable factors (such as years of driving experience). The Department of Insurance found that the effects of gender on rates varied widely by location.

“Gender’s relationship to risk of loss no longer appears to be substantial,” the department wrote in a report.

So, if you’re in one of the affected demographics, you may be getting a break on your insurance — but you should still shop around for the best price. Good luck!